Causes of Underdevelopment according to Baran

 Before
we come to dependency theories that during the 1970s and after came to dominate
large parts of the development debate, it is deemed relevant to look a little
close at the role Paul Baran played in establishing the theoretical linkages
backwards to classical Marxism.

Baran
who emigrated to the USA from the USSR before the Second World War, wrote his
most influential work in 1957. It included both an historical account of the
origins of underdevelopment and an analysis on the ‘morphology’ of contemporaryunderdevelopment. Baran conceptualized the causes of underdevelopment in much
the same way as his contemporary non-Marxist economists. 

He emphasized that
the backward countries were characterized by dual economies: on the one hand
they comprised large agricultural sectors, where productivity was extremely low
and the marginal productivity of labour close to zero; on the other hand, they
had small industrial sectors with high level of productivity. 

Baran further
stressed that the growth and’ employment potential lay in the industrial
sector, but that its expansion was constrained by the small size of the
domestic markets as well as by competition from the highly industrialised
countries. All these were generally accepted views in the 1950s. The important
new feature in Baran’s approach and analysis was his attempt to explain this
state of affairs, and, in particular, why the backward societies remained
underdeveloped. In pursuit of this explanation, Baran introduced a special
version of Karl Marx’s economic theories with emphasis on class relations and
their impact upon the utilization of the economic surplus.

Where
Marx, in his analyses of conventional capitalism, had underlined how the capital
owners could expropriate an economic surplus from the working class in the form
of surplus value produced by the workers (who were not paid the full value of
their labour), Baran, emphasized the extraction of economic surplus in all its
forms. In the backward economies, the surplus potentially available for capital
formation did not only take the form of surplus value produced by wage labour,
but also included the appropriation of surplus from peasants and other direct
producers in the form of land rent, interest on credit, and profits from trade.
Four main classes each appropriate surplus in one of these forms.

Land
rent was extracted by the feudal aristocracy or other big landowners. Interest
on credit accrued to the moneylenders, who were sometimes the same people as the landowners. The profit from trade was appropriate by merchants who made a
living from buying cheaply and selling dearly. Finally, the surplus value from
capitalist production was appropriate by the largely foreign capitalists, but
also to a certain extent by the emerging groups of national industrialists.

Baran’s
crucial point was that none of these four propertied and economically dominant
classes had any vital interest in promoting industrialization and the
accompanying transformation of the peripheral economies. The feudal landowners,
moneylenders and traders, in fact, opposed this because it would threaten their
access to the traditional sources of economic surplus. 

Paul Alexander Baran. Wikipedia Image

The foreign and national
capital owners were also against it, because a more comprehensive
industrialization process would undermine their monopoly position and force
them into competition with new entrepreneurs a which in turn, could threaten
their extraordinarily high profits. In such circumstances capitalism was devitalized
and deprived of its growth and development dynamism — the dynamism that, under
other circumstances, had created impressive economic progress in the centre
formations during an earlier period.

Baran,
contrary to the classical structuralists and many later dependency theorists,
focused mainly on the internal conditions in the backward societies. It was in
these internal conditions, and more specifically in the distribution of power
among the classes and control over the economic surplus, that Baran found the
primary barriers which had prevented the poor countries from copying the
industrialised countries and reaching a similar stage of development. However,
Baran also emphasized the international circumstances by underlining that
economic development in the backward societies was profoundly inimical to the
dominant interests in the advanced capitalist countries. As these countries
governed the international economic system, the underdeveloped countries
remained trapped in poverty (cf. Palma, 1989).

The
only way Baran could see out of the misery was through extensive state
interventions to promote nationally controlled industrialization. The
recommended strategy markedly distinguished itself from those of the
structuralists by emphasizing the establishment of state-owned heavy industries
as a precondition for evolution on the other industrial sectors.

The
strategy proposed by Baran, directly or indirectly, achieved some influence on
economic planning in countries such as India and China, but did not otherwise
play any central role in the theory formation within the Neo-Marxiit school of
thought. On the other hand, Baran’s analyses of the causes of underdevelopment
became an important source of inspiration for scholars like the American economist, Andre Gunder Frank, the following section will briefly review the
contributions to theory formation from the Egyptian economist, Samir Amin, and
the Graeco-French economist, Ashiri Emmanuel. 

Frank based his original
dependency theory mainly on evidence from Latin America, while Amin drew his
conclusions chiefly from empirical analysis of West Africa. Emmanuel drew more
widely on the developing countries, trade with the industrialised countries. In
terms of analytical perspective he worked only with a few rather limited
subject areas — as opposed to Frank and Amin.

After a brief
examination of the earlier works on dependency, from the 1960.. and the
beginning of the 1970s, we shall try to trace the main lines of thought in the
debate among the Neo-Marxists during the subsequent decades. This will include,
on the one hand, a discussion of what can be conceived of as attempts to
further elaborate and refine the original propositions, and, on the other hand,
a summary of opposing positions in the debate. In the next chapter, we shall
follow yet another school of thought with roots going back to Mar and Baran:
theories on modes of production and social classes which focus primarily on the
internal conditions :n peripheral societies.